Viceroy says Capitec will unravel, Sarb says it's solvent
Viceroy has likened Capitec to a loan shark and questioned its ability to survive, while the Reserve Bank says the bank is is solvent, well capitalised and has adequate liquidity.
JOHANNESBURG - The South African Reserve Bank (Sarb) says as part of its mandate, it monitors the safety and soundness of all banks, including Capitec.
On Tuesday, US-based fund manager Viceroy released a report which likened Capitec to a loan shark. It questioned Capitec's ability to survive, saying its business model is not sound.
Fund manager Viceroy says it compiled the report based on information from former Capitec employees, customers and people familiar with the business.
It says Capitec Bank Holdings Limited is a South Africa-focused microfinance provider to a low-income demographic, yet it out-earns all major commercial banks globally including competing high-risk lenders.
Viceroy says Capitec is involved in predatory finance but must take significant impairments to its loans which will likely result in a net-liability position.
It says it’s only a matter of time before Capitec’s financials and business unravel.
However, Sarb responded, saying Capitec is solvent, well capitalised and has adequate liquidity.
It says the bank meets all prudential requirements.
Read the Viceroy report 'Capitec: A wolf in sheep’s clothing'
VICEROY MAKING QUICK MONEY?
The motives of fund manager Viceroy are now being questioned following its report that Capitec Bank is a wolf in a sheep's clothing and may not survive in the long term.
This saw Capitec's share price plummet, but the Reserve Bank was quick to respond, saying Capitec is solvent, well capitalised and has adequate liquidity.
The chief economist at Econometrix, Dr Azar Jammine, says Viceroy is known for trying to make quick money.
“In other words, selling shares of companies with a view to buying them back at a lower price once their report is out and people have reacted negatively.”
Chief strategist at Pan African Investment and Research Dr Iraj Abedian agrees.
“My suspicion is that Viceroy is in cahoots with hedge funds, who are sure to defend their stocks and trying to make a quick buck on the market volatility.”
The Reserve Bank says Capitec meets all prudential requirements and has given it the thumbs up.
(Edited by Shimoney Regter)